Árni Mathiesen Minister of Finance spoke at the finance convention of the Union of Icelandic Provinces this morning. In his speech he noted that the unemployed increased by 1300 from the beginning of October to current date. Then he said that unemployment will increased substantially next month and add to about 3.5%. He said it was clear that this evolution is hitting hardest on the Capital area, but how things will evolve will later be clear.

He said that tax incomes are going to lower shortly, expenses will also lower and interest difference will be negative in a way that it will really matter. Then request and economic growth will lower very fast. Then he said there is uncertainty about most matters in the government financial areas. He says it is not unlikely that the income of the national treasury could lower by a quarter between the years 2008 and 2009.

He said it was evident that the contributions of the national treasury to the equalization fund of the provinces would lower by at least 10%.

Árni also spoke about the debts of the national treasury, which has increased significantly lately, and specially after the government nationalizing the banks and taking over their bonds. He said it was clear that the authorities have to make cut downs on expenses significantly in the next years. Both government and provinces. He said that the national treasury has nothing to spare to lower the debts of the provinces in the next years.

He recommended setting finance matters for provinces, to be able to ease the process of lowering expenses for the national treasury. Also he said that in an answer to a person at the meeting that the consults between the government and provinces has to be tightened shortly and put older disputes from the good seasons aside.
Worst situation seen

Halldór Halldórsson

Halldór Halldórsson, chairman of the Union of Icelandic Provinces, said in his opening speech this morning that the financial state of the provinces are now in their worst situation that has been seen. He used a well used metaphor and said that the provinces are now sailing their beat up ship back to the shore. He said that the provinces have to look to their financial backup, the government, and the Minister of Finance showed it understanding even though he is himself facing serious problems with the national treasury.

He said in the year 2007 not compatible to anything, when the finances of the provinces are viewed. Sales of lots, that was a big part of the income of provinces at that time, is now coming back to hit the chairmen of the provinces in the back, since the lots are being returned in great counts.

Halldór also spoke of the prices of the provinces and emphasized that the provinces in the country have to watch those matters in the next seasons. He said it was irresponsible to say that taxes and dues will not be raised in near future, that it is impossible to not reduce service. He spoke of the urgency to protect the basic service of the provinces.